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Ethics, Triple Bottom Line & Stakeholder Perspective

Module: Module 3 — Strategy & Senior LeadershipCode: ETSE (STI)Faculty: Prof. Shruti TewariSessions: 3Status: ✅ Drafted

Big idea​

Ethics are society's external standards of right and wrong; morals are the individual's internal beliefs. Three classical frameworks dominate the analysis of dilemmas: Consequentialism / Utilitarianism (judge actions by outcomes — greatest good for the greatest number, Mill); Deontology (judge actions by duties and principles, regardless of outcome — Kant); and Virtue Ethics (judge actions by the character they cultivate — Aristotle). The classic case is McCoy's Parable of the Sadhu — hikers in the Himalayan death zone encounter a dying holy man and each must choose between helping him and reaching the summit. The modern corporate extension is the Triple Bottom Line (Elkington 1994 — People, Planet, Profit) and the Stakeholder Perspective (Freeman 1984 — the firm exists to create value for all stakeholders, not just shareholders).

Key concepts​

  • Ethics vs morals. Ethics = society's external standards (codes, laws, professional norms). Morals = individual's internal beliefs (upbringing, religion, philosophy). Ethical decisions require a foundation of personal moral values.
  • Three classical frameworks. Consequentialism (Mill — ends-based, greatest good for greatest number); Deontology (Kant — duty-based, certain acts intrinsically right or wrong regardless of outcome); Virtue Ethics (Aristotle — character-based, what kind of person will I become?).
  • Parable of the Sadhu (McCoy, HBR 1983/1997). Hikers in altitude zone-of-death encounter exhausted holy man. Collective diffusion of responsibility, individual rationalisation, organisational analogue (a company in crisis where no one owns the harm). Groups of decent individuals make indecent collective decisions.
  • Triple Bottom Line (Elkington 1994). People (social/labour impact), Planet (environmental impact), Profit (financial return) — three accounts kept and reported together. Elkington himself later called for a recall because firms used it as a reporting exercise rather than a transformation framework.
  • Stakeholder theory (Freeman 1984). The firm has obligations to all stakeholders (employees, customers, suppliers, communities, environment, shareholders), not solely to shareholders (Friedman's narrower view). The Business Roundtable's 2019 restatement of corporate purpose explicitly adopts this position.
  • Practical ethical decision discipline. Name the stakeholders; apply each framework (consequentialist, deontological, virtue) and see if they converge; run the front page of the Times test; build institutional infrastructure (whistleblower channel, ethics ombudsman, independent board oversight).

Self-check​

A product team discovers a software bug that affects 0.3% of users and produces incorrect, slightly favourable billing. Fixing it is expensive; disclosure is embarrassing; the bug will likely never be found externally. Through the three classical frameworks plus the stakeholder lens, what is the strongest case for fixing and disclosing?

  • A. Avoid lawsuit risk
  • B. All three frameworks converge: Consequentialist — the long-run cost of an eventual exposure (trust collapse, regulatory action) far exceeds the disclosure cost. Deontological — there is a duty not to take money on a false basis, independent of detection probability. Virtue — a firm that suppresses known harms becomes the kind of firm that suppresses larger harms. Stakeholder — affected customers have a right to know and be made whole
  • C. The CEO will face consequences
  • D. It is legally required
Ethics vs morals in one line
Ethics = society's external standards (codes, laws, professional norms). Morals = individual's internal beliefs (upbringing, religion, philosophy). Ethical decisions require a foundation of personal moral values; their tension is the source of most dilemmas.

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Continue learning​

📄HBR · CaseThe Parable of the Sadhu (McCoy)Bowen McCoy's foundational HBR case on diffusion of responsibility and organisational ethics — the most-taught business-ethics piece.📄HBR · Read25 Years Ago I Coined 'Triple Bottom Line' — Elkington's RecallElkington's own retrospective on TBL — why firms reduced it to reporting and why he was issuing a 'product recall' of the concept.📊BRT · ReferenceBusiness Roundtable Statement on PurposeThe 2019 statement signed by 181 CEOs redefining corporate purpose from shareholder primacy to multi-stakeholder responsibility — Freeman in practice.📊Stanford · ReferenceBusiness Ethics (Stanford Encyclopedia of Philosophy)The peer-reviewed reference entry on business ethics — the cleanest single source on consequentialism, deontology, virtue ethics and stakeholder theory.
🪞 Apply it — reflection prompts
  1. Take a recent borderline decision at your firm. Apply each of the three frameworks (consequentialist, deontological, virtue). Do they converge — and if not, which framework is your gut overweighting?
  2. Map your firm's stakeholders (Freeman). Which one is most under-represented in your current decision processes — and what would a stakeholder-balanced redesign of one operating-committee agenda look like?
  3. Audit your firm's TBL reporting. Is it a transformation framework (driving real People and Planet trade-offs) or a reporting framework (annual report appendix)? What would have to change for Elkington's original intent to take hold?

📝 Going deeper. Bowen H. McCoy, "The Parable of the Sadhu" (HBR 1983; reissued 1997) is the founding case. R. Edward Freeman, Strategic Management: A Stakeholder Approach (1984) is the canonical stakeholder text. John Elkington's "25 Years Ago I Coined the Phrase 'Triple Bottom Line.' Here's Why It's Time to Rethink It" (HBR, June 2018) is his own retrospective.